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The Types of Mutual of Funds

Nowadays, mutual funds are available in different types, and this means that all people who want to make solid investments should be familiar with their ins and outs. If you’re one of these investors, remember the following categories of mutual funds.

First, money market funds are used to invest in all kinds of short-term and fixed-income securities, including treasury bills, government bonds, commercial papers, banker’s acceptances, and deposit certificates. They offer a safer investing possibility, but they come with lower potential returns compared to other types of mutual funds. Fixed income funds buy the investments that pay fixed rates of return, such as investment-grade corporate bonds, government bonds, and high-yield bonds. Their basic purpose is to have money coming into these funds on an ongoing basis, and it happens mainly through the interests that they earn. However, investors should remember that high-yield corporate bonds are riskier than others.

Equity funds invest in a range of stocks, and their basic target is growing faster than such types as fixed-income or money market funds. This means that they are associated with higher risks than investors may lose their money. For example, people can choose from a variety of equity mutual funds, such as the ones that specialize in growth and value stocks, income funds, small, mid, and large cap stocks, and their possible combinations.

Balanced mutual funds invest in a certain mic of fixed-income securities and equities. They are used to balance the goal of earning higher returns against a possible risk of losing money. These funds usually follow a particular formula to split available money among different investment types, and they have a higher risk compared to fixed-income funds, while being safer than pure equity mutual funds. Besides, aggressive funds hold fewer bonds and more equities, whilst conservative ones hold fewer equities relatives to different bonds.

In addition, there are index funds that are targeted at tracking the performance of a given index. Their value can either increase or decrease and they tend to have lower costs compared to actively managed funds. The main reason is that investors or portfolio managers don’t have to do a lot of research or make a number of important investment decisions. These basic mutual fund types should be considered when making financial investments.

Nowadays, mutual funds are available in different types, and this means that all people who want to make solid investments should be familiar with their ins and outs. If you’re one of these investors, remember the following categories of mutual funds.